The first checks from the $3.6 billion settlement with America’s largest banks went out last month, but they left much to be desired. After being “accused of wrongful evictions and other abuses,” these banks agreed to pay out to those who had been harmed, according to a recent article in the New York Times.
Yet, it turns out that nearly 80 percent of people receiving checks will end up getting less than $1,000. On top of the limited relief, some struggling homeowners who received a mortgage settlement check took it to the bank, only to find that there were insufficient funds to cover what seems like a meager amount in relation to the large settlement.
History of the Settlement
You may remember that nearly a dozen big banks reached a settlement in 2011 relating to allegations of robo-signing and other illegal mortgage practices. In the beginning stages of the settlement, the banks indicated that they’d pay consultants “to review individual loan files to determine who was mistreated and how much they should be compensated.”
However, as the Chicago Tribune explains, the costs “ballooned,” which led to a new settlement in January 2012. This settlement ended plans for an independent foreclosure review. Additionally, advocates argued that these reviews were time-consuming and costly, and in the end didn’t actually have an effect on many struggling homeowners. So instead, the new settlement required “$8.5 billion in cash payments and mortgage relief.”
For example, the 2012 settlement mandated that Wells Fargo pay $766 million in cash and provide $1.2 billion in borrower relief, while Bank of America was scheduled to pay $1.1 billion in cash and to provide $1.8 billion in relief. Other banks involved include HSBC, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank, Aurora, Morgan Stanley, and Goldman Sachs.
Details of the Settlement Check Amounts
According to The Charlotte Observer, about 4 million borrowers are eligible to receive funds from the settlement. However, approximately 77 percent of them will receive under $1,000, while nearly 60 percent will receive only $300.
The $300 checks are the lowest that can be issued from the settlement. It advertises payments that range between $300 and $125,000, but these figures are somewhat misleading. While the maximum amount for the settlement checks is actually the advertised $125,000, only about 1,100 people—out of nearly 4 million—will receive checks for that amount. The majority of these borrowers are military service members whose houses were foreclosed on while they were on active duty. In short, the majority of borrowers slated to be eligible for mortgage settlement checks won’t receive more than $1,000, and many won’t get any more than $300.
Settlement Checks Bouncing?
In addition to low payouts, some borrowers have indicated that their settlement checks can’t be cashed! The New York Times reported that Ronnie Edward, whose home was foreclosed on nearly three years ago, received a check for $3,000. Edward is in the minority of borrowers with his higher-than-average settlement check. However, when he took it to his bank in Tennessee, the bank told him that the funds “were not available.”
In fact, the article suggests that many of the 1.4 million homeowners who received the first round of settlement checks may have faced similar problems. Rust Consulting, a firm used to distribute checks, apologized to the borrowers who were unable to cash their settlement payments. James Parks, the senior vice president at Rust, said that the firm was “working hard and communicating with the banking regulators, the servicers, and other banks to ensure those issues were not repeated.”
If you have questions about foreclosures in your area or about the mortgage settlement checks, contact an experienced foreclosure defense attorney today.
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